We often get asked by clients, is it better to transfer their property now or wait until they die and deal with their property in their Will. The following is a brief summary of the tax implications of transferring now or leaving the property in a Will.
If the property that is to be transferred consists of agricultural land, is the person who intends transferring the property over 55 and have they farmed the lands for 10 years, if so, they may qualify for retirement relief and may not have to pay Capital Gains Tax. If the person to whom they intend transferring the lands is under 35 years of age, has obtained the necessary agricultural qualification, has submitted a business plan to Teagasc and will be head of the farming holding they may qualify for what is called the Young Trained Farmer relief and will not have to pay Stamp duty. Stamp duty is usually 7.5% on the value of the property being transferred. If the person to whom the property is being transferred avails of this relief they will be agreeing to spending 50% of their working hours on the farm and they must not sell the property for five years after attaining it, otherwise there will be a clawback of the stamp duty that would have been due.
If the person who is getting the lands is does not satisfy the conditions for the Young Trained Farmer relief they may qualify for what is called Consanguinity Relief, which reduces the stamp duty liability from 7.5% to 1% of the value of the property being transferred. In order to qualify for Consanguinity Relief you must be related the person who is transferring the property and you must farm the land for at least 6 years OR lease it for a minimum of 6 years to someone who will farm it. If you are farming it you must hold a specified qualification or obtain same within 4 years OR you must spend at least 50% of your time farming the land.
Stamp duty is only payable on transfers of the property during a person’s lifetime, it is not payable if the property is dealt with in a Will.
In relation Capital Acquisitions Tax, if a person transfers their property during their lifetime, the person they transfer it to will be liable to Capital Gift Tax and if they wait until after they die, the beneficiary pays Capital Inheritance Tax. Both are currently charged at 33%. Depending on the relationship between the person who transfers and the person who receives the property, there are threshold amounts which will apply. Any property gifted or inherited over the value of the threshold amount is taxed at 33%.
Currently there are three threshold categories;
Category A – a child/foster child/minor child of a deceased child – €335.000.00
Category B – brother/sister/niece/nephew – €32,500.00
Category C – all others – €16,250
FAIR DEAL SCHEME;
A person may wish to transfer their property to their next of kin now as, under the Fair Deal Scheme the amount a person will need to pay towards their nursing home care will depend on their income and their assets. The more assets you own, the more of a contribution you will have to pay. If a person has assets (lands or dwelling house) they must pay 7.5% (3.75% if part of a couple) of the value of the assets. The HSE do not take into account any transfers of a person’s lands or dwelling house more than five years before their application for the Fair Deal.
If you wish to discuss a transfer of your property please feel free to contact Gearoid, Ciara or myself by either telephoning 065 9051009 or emailing gwilliams@mcmahonwilliams.ie; ccomerford@mcmahonwilliams.ie; skenny@mcmahonwilliams.ie.
Sinéad Kenny
9th June, 2021
